Housing Prices: Bottoming Out or Still Falling?

new homes

Quick: Home prices have bottomed out or they could still drop an additional 25%.

Depending on what you read and whom you believe, you will hear diverging, even contradictory predictions outlining housing trends through the remainder of this year. Some analysts appear to be applying possible local market conditions to the the national scene, something which simply shouldn’t be done.

Different Conditions In Various Markets

What happens in Boise, Idaho is a far cry from the conditions in Detroit, Raleigh, Sacramento and elsewhere. True, the overall housing market was flat or down in 2007, but there were some bright lights then and there will be additional ones in 2008.

Fact: Roughly half of the U.S. metropolitan statistical areas saw the median prices for existing single-family homes increase during the fourth quarter of 2007. Early indications for 2008 is that many of these same areas are seeing the upward trend continue. Source: National Association of Realtors.

Fact: Home sizes are up, approximately 50% bigger than homes built three decades ago. Better construction materials, sophisticated electronic connections, improved appliances including heating/cooling and the inclusion of outdoor amenities such as in-ground pools adds to the cost of a new home.

Fact: The biggest pressure on the housing market has been adjustable rate mortgages, particularly for those homes financed when rates were at their lowest. With hundreds of thousands of homeowners refinancing in 2008 thanks to lower interest rates, the number of homes becoming available due to foreclosure is dropping. As the market tightens, home prices will increase.

Boom, Then Bust?

Some analysts are predicting that 2008 will turn out better than expected in some markets, but are cautioning that the gains could be short-lived if mortgage rates head up again come 2009.

Speculating how market conditions will perform has been going on for years — getting it right is a science in and of itself!